• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Kenyan Government Meets Oil Companies Over Fuel Crisis

Posted on: Thursday, 11 August 2005, 06:00 CDT

Text of report by Standard team entitled "Crisis talks to avert looming fuel crunch" published by Kenyan newspaper The Standard website on 11 August; subheading inserted editorially

The government and key players in the oil industry yesterday held a crisis meeting to avert a looming nationwide oil shortage.

Mr Wanyanbura Mwambia, an under secretary in the Ministry of Finance, confirmed that the stakeholders have agreed to meet with the government and find a lasting solution to the impending crisis.

"We met and agreed to continue holding meetings but the issue of the refinery will need to be addressed urgently," he said.

The crisis deepened yesterday, with the retail price for super petrol climbing to 80 shillings [1.05 dollars] per litre in Nyanza and Western provinces. Nairobi's pump prices stabilized at 74 shillings [0.98 dollars] but could be expected to rise as the shortage bites.

Industry players, however, attribute the rise in prices to soaring international crude prices, which has hit 64 dollar mark (4,800 shillings) per barrel.

The sharp price increase has sent jitters through the market, with a number of major consumers and other members of the Kenya Association of Manufacturers (KAM) exploring the possibility of switching to coal.

However, oil companies blamed the newly-introduced KRA tax collection systems for the pile up at the Eldoret and Kisumu depots of the Kenya Pipeline Corporation.

Speaking from Mombasa, Shell/BP managing director Patrick Obath said the slow clearing process by KRA had caused a pile up of tankers at the two depots.

Considering that the centres provided oil products that are distributed to neighbouring Uganda, Rwanda, Burundi and DRCongo, the congestion had reduced the efficiency of the pipeline.

However, KRA officials denied that the slow clearance was the major problem saying the dealers had opposed the new tax measures from the outset.

"The dealers have been opposed the system and we cannot rule out sabotage," said a senior KRA officer who sought anonymity.

Early this week the commissioner of customs, Mr Francis Thuranaira, said the government had met the dealers half way by relaxing the rules that demanded that they pay taxes due up front.

Finance minister David Mwiraria had in his budget speech demanded full payment of the taxes beginning 1 August. The dealers are, however, now required to pay only 50 per cent.

They are then expected to pay 25 per cent of the remaining 50 per cent on the 15th of the month and make the remaining 25 per cent on the 30th day of the month.

Coal

East African Portland Cement yesterday confirmed that it was looking at the possibility of switching to coal because of the increase in fuel prices in Kenya. Ndagwa Kagio, the works general manager, described fuel crisis as one of the biggest impediment to its regional expansion programme.

He said the current pressure on fuel prices might force the company to pursue coal as an alternative source.

KAM, however, expressed concern that oil companies were affecting the operations of its members by raising the cost of fuel. Martin Mutuku, the acting CEO warned that manufacturers would be forced to increase the cost of goods in retaliation.

"What we have seen has worried us because we do not see justification for the increase in fuel prices," Mutuku said.

"We are likely to have a ripple effect in the industry in the name of upward price adjustments if nothing positive happens in the next one month."

Other sources in the industry warned that the cement industry should be the biggest loser once the full effects of the fuel crisis creep in.

According to Suresh Kumar, the commercial director at Athi River Mining, the company fears adverse effects of high fuel prices on the industry's profitability margins.

"I am in a dilemma because while the fuel prices have increased by between 75 and 80 per cent, I cannot pass over such costs to the consumers by way of higher commodity prices," he said.

Other than cement production, silicate and lime, the firm's other production lines are operated on fuel, whose costs have just gone up. "The furnace cannot be stopped because of the fuel costs and any intermittent interruption will lead to huge losses."

He asked the government to sort out the mess would cost his firm 20m shillings monthly.

Source: BBC Monitoring Africa

More News in this Category